Types of Client Accounts
When opening new accounts with a broker-dealer, customers have several different options. There are three basic account types that are typically maintained at most broker-dealers: cash accounts, margin accounts, and option accounts. Before a client becomes involved in making transactions, she should set up an account choosing one of these methods.
Let’s look at the differences between each of these account types.
A cash account is one that does not involve credit in any way. Simply put, the customer pays in cash for each transaction. That means each security purchased must be paid in full at the time of sale.
In a margin account an investor can use credit to pay for some portion of the